1 Further Look At Financial Statements Objective of financial reporting: provide info useful in making decisions To be useful information must be: O Relevant: do you care? 0 Reliable: can you count on it? O Comparable: to my foreign competitors? O Consistent: prepared same way last year?2 Further Look At Financial Statements QO Accounting constraints = Materiality: does it matter? O Waste basket: asset or expense? Same for every company? m= = Conservatism: 0 Don't overstate income or assets @ What about liability and expenses?3 Further Look At Financial Statements O Uses of financial ratios m _ Intracompany comprisons O Ford 2010 sales versus 2009 = Intercompany comparisons O Wal-Mart versus Target profit margin = Industry comparisons 1 McDonalds profit margin versus other restaraunts